I caution people to be realistic about returns. Some cannabis investors see a lot of revenue in this industry and can become overly optimistic. I tell people don’t just ask what the revenue is, ask about profits. There are unique federal tax deduction restrictions on cannabis businesses, so profits and return on investment do not have the same relationship to gross revenue as they might in another sector.
I had the pleasure of interviewing William Bogot, Partner and Co-Chair of the Cannabis Law Practice at Fox Rothschild LLP. Bill represents clients in highly regulated industries, particularly gaming and cannabis. He has worked for all three branches of the Illinois government: the executive, legislative and judiciary. However, Bill represents clients nationwide, both in regulatory matters and civil litigation. As co-chair of the Cannabis Law practice, Bill counsels clients in the medical and recreational cannabis space in multiple states across the country. He is a trusted adviser to both public and private cannabis companies.
Thank you so much for doing this with us, Bill! Can you share with us the story about what brought you to this specific career path?
I started out as a humble state employee working as a lawyer for the Illinois Gaming Board, regulating casinos.
A year after I left the gaming board and was in private practice, Illinois passed its medical marijuana statute and people were looking for lawyers to help them with their license applications. Since the competitive application process was similar to the competitive casino application process, prospective cannabis license applicants reached out to me and my partner Donna More, who also previously worked for the Illinois Gaming Board.
Donna and I helped people get their initial cultivation and dispensary licenses in Illinois and by word of mouth we earned a reputation as go-to advisers. Over the years people started to appreciate our perspective, training and advice on how to do business in highly regulated industries like gambling and cannabis. In addition, since our firm has offices across the country, our cannabis practice soon spread to other states. That’s how we got here.
Can you share the most interesting story that happened to you since you began leading your company?
There’s no single anecdote that pops to mind, but the most interesting aspect of working with new businesses in the cannabis sector is that startups in this space are going from zero to 60 a lot faster than they used to. The closest analogy I can think of is that cannabis is exploding in a way that compares to the internet era. Some of these companies are following a path that’s a lot like Apple’s, growing so quickly that within five years they are national and then international, with market values that reach the billion-dollar level.
What makes my practice so interesting is that I come into the office nearly every day to questions and legal issues that no one has dealt with yet. There’s no playbook or treatise about cannabis law that you can reference and say “Oh, this is how it’s done.” With our clients, we are writing that playbook each day.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
I think the biggest mistake I made when I started out 25 years ago was thinking that my work would be all about the legal issues and not realizing that lawyers are in the business of providing a counseling service. It’s not that the legal analysis doesn’t matter — of course it does — but the job is really about communicating to people what we can do for them to help their business. How do I add value? That’s a humbling realization, but it’s also liberating. Being a lawyer is being a counselor. I now fully appreciate why my law license denotes me as an attorney and counselor at law.
Are you working on any exciting projects now?
While most of my work for the last year has been outside of my home state, the hot topic right now is the new Illinois adult-use cannabis law. Adult-use goes live in Illinois on January 1, 2020. Our medical marijuana dispensaries will generally be able to start selling adult-use out of their existing locations and will be given the opportunity to open so-called secondary sites for such. The race for secondary site real estate is going strong, and all of us are trying to figure out which towns will allow or prohibit adult-use sales.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
My family. I know that probably doesn’t make for good reading, but my wife and children are the ones who have been putting up with my long hours as this industry took off. Typically, I don’t get home until 8 pm, then I hang out with the kids for a bit and by 10 pm I’m answering emails until past midnight. My family has been extremely supportive. Everyone in my family knows not to make plans that include me for Saturday and Sunday morning before noon because that time is reserved for my end of the week catch-up work time.
My 13- and 15-year-olds get a big kick out of telling their teachers that I’m a “pot lawyer.” Recently, I was the guest lecturer at my daughter’s high school. I presented on the history of marijuana regulation for her summer school’s health class. Honestly, the students were likely the best audience I’ve ever had. They had the smartest questions, including one that led to a conversation about how marijuana can be treated like a commodity, determining supply and pricing markets like pork bellies.
Can you share 3 things that most excite you about the Cannabis industry? Can you share 3 things that most concern you?
As a Chicago-based cannabis lawyer, one thing that particularly excites me is that several of the massive, multistate cannabis companies are headquartered in Chicago. I have watched them grow from 5 or 6 people with a dream into companies with 400 to 800 employees.
I’m also very excited by the new adult-use cannabis law here in Illinois. My team is going to be very busy as Illinois makes adult-use licenses available to all kinds of businesses, from craft growers to infusers to dispensaries.
I’m also just thrilled with one aspect of the Illinois law that could have truly profound and transformative effects on people’s lives. It’s a provision that is designed to undo the harmful effects of the so-called war on drugs by providing that people who have been arrested or convicted for certain marijuana crimes, or live in neighborhoods with high arrest rates for such, be given a preference by the state when it doles out licenses to new adult-use cannabis businesses. This may shock some people, but I think it’s remarkable that someone adversely impacted by the war on drugs with a conviction for using pot will now get a leg up and be able to actually make an honest, state-legalized living selling cannabis products.
Can you share 3 things that concern you?
- Perhaps what concerns me most is possible changes in federal law on cannabis. It’s inevitably going to happen, but the devil is in the details. How are they going to do it? There are always unintended consequences.
- Also front of mind for me right now is the uptick in litigation in the cannabis space. What’s happening is a lot of money is being invested and things are moving fast, so some people don’t lock things up as detailed as they should with proper operating agreements funding arrangements, or other contractual safeguards. Later they come to us after-the-fact to help clean things up, which is often more difficult and more expensive. On a related note, I think we will see an increase in class and collective actions in the cannabis space.
- I’m also concerned with the possibility of regulation in the hemp/CBD space. We are all waiting to see if the Food and Drug Administration is going to allow and regulate interstate sales of certain CBD products, which right now fall into a strange gray zone, although many believe it’s back and white. We may hear from the FDA on the issue as early as October.
Can you share the 5 questions you should ask in order to successfully invest in the cannabis industry”? Please share a story or example for each.
1.When investors and friends are excited to move forward with a buddy who has a cannabis investment idea, I tell everyone to pretend you’re investing with a stranger. Be just as cautious and think about what you want. Make sure to think about the contractual rights you will want in the future if things, or your friendship, fall apart. Even better, use a lawyer with experience in cannabis law.
2. I caution people to be realistic about returns. Some cannabis investors see a lot of revenue in this industry and can become overly optimistic. I tell people don’t just ask what the revenue is, ask about profits. There are unique federal tax deduction restrictions on cannabis businesses, so profits and return on investment do not have the same relationship to gross revenue as they might in another sector.
3.Another area of concern I often point out is the need to be thoughtful whenever you’re going to be a minority investor, such as when you’re just one of a group of 100 or more shareholders. It’s important to ask the right questions before you invest and to be confident that you protect your rights to expected distributions. What about when you want to get out — can you sell your shares? Think about how and when you can exit.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I have been a vegetarian for 30 years for moral reasons. So, if I could inspire a movement, it would be: eat less meat. I think it’s better for the planet, at least as compared to some types of factory farming. My second inspirational recommendation — one that I myself need to do — is get outside more in nature. It just soothes your soul, unlike a desk.
What is the best way our readers can follow you on social media?
Personal LinkedIn ( https://www.linkedin.com/in/williambogot/)
The firm’s Twitter account (@FoxRothschild
In The Weeds blog (https://cannabislaw.foxrothschild.com/)
I think LinkedIn has been great for the Cannabis industry, it has been great for Cannabis professionals who have networked and follow each other. I go there every day and it keeps me on top of the daily cannabis news stories. I think it’s a great way to follow what our firm and industry in general are doing.
This was very inspiring. Thank you so much for joining us!